Continuing to contribute to an HSA after retirement?

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Topic Author
TresBelle65
Posts: 170
Joined: Sun Apr 12, 2015 2:44 pm

Continuing to contribute to an HSA after retirement?

Post by TresBelle65 » Fri Nov 15, 2019 10:22 am

I am retiring in the first quarter of 2020 from the federal govt. My understanding is that I can continue to contribute to my HSA (as long as I still have the HDHP and no other health insurance).

I won't be contributing via payroll, so I can just send the contributions directly to the brokerage (in this case, Ameritrade)?

Currently, HSA Bank acts as an intermediary in this process (I am a federal employee),
so it would appear this relationship will end as well.

Also, my understanding is that unlike a 401k type account, these contributions are made on an evenly pro-rated basis, not front loaded.

Anyone have any experiences or tips to share with this process? Thank you.

TropikThunder
Posts: 1845
Joined: Sun Apr 03, 2016 5:41 pm

Re: Continuing to contribute to an HSA after retirement?

Post by TropikThunder » Fri Nov 15, 2019 12:39 pm

TresBelle65 wrote:
Fri Nov 15, 2019 10:22 am
I am retiring in the first quarter of 2020 from the federal govt. My understanding is that I can continue to contribute to my HSA (as long as I still have the HDHP and no other health insurance).

I won't be contributing via payroll, so I can just send the contributions directly to the brokerage (in this case, Ameritrade)?

Currently, HSA Bank acts as an intermediary in this process (I am a federal employee),
so it would appear this relationship will end as well.

Also, my understanding is that unlike a 401k type account, these contributions are made on an evenly pro-rated basis, not front loaded.

Anyone have any experiences or tips to share with this process? Thank you.
TDA is just the investment portal but HSA Bank will still be the responsible custodian for the HSA itself. If you look at your TDA statements, the account name Is something like “HSABANK HSA FBO [your name]” indicating it’s a custodial account. Depositing money directly into the TDA account will mess up the HSA record-keeping (if it even let you make a deposit).

As far as front loading, there’s nothing stopping you from making the full contribution on Jan 1, but the allowed contribution is pro-rated for however many months you have eligible coverage. For example, if you know you’ll have eligible coverage from Jan to Jun, you could contribute 6/12 of the annual limit on Jan 1 the only caution is to double check later in the year and verify you contributed the right amount.

Topic Author
TresBelle65
Posts: 170
Joined: Sun Apr 12, 2015 2:44 pm

Re: Continuing to contribute to an HSA after retirement?

Post by TresBelle65 » Fri Nov 15, 2019 3:09 pm

As far as front loading, there’s nothing stopping you from making the full contribution on Jan 1, but the allowed contribution is pro-rated for however many months you have eligible coverage. For example, if you know you’ll have eligible coverage from Jan to Jun, you could contribute 6/12 of the annual limit on Jan 1 the only caution is to double check later in the year and verify you contributed the right amount.

Not clear on this part.

Full contribution = the $4K plus per year limit?

Allowed contribution = ?

eligible coverage - I am planning to keep my HPDP in retirement, so? not sure of the impact here.

RubyTuesday
Posts: 251
Joined: Fri Oct 19, 2012 11:24 am

Re: Continuing to contribute to an HSA after retirement?

Post by RubyTuesday » Fri Nov 15, 2019 3:17 pm

My understanding is that you can completely contribute your full (eligible*) contribution at any time while you are eligible to contribute. So if you remain in the HSA eligible HDHP all year, you can front load the full IRS limit (family or individual depending on level of coverage and also including any age-related catch ups).

*if you aren’t in a plan for the entire year, there are rules for prorating how much you can contribute, but can still be front loaded.

RubyTuesday
Posts: 251
Joined: Fri Oct 19, 2012 11:24 am

Re: Continuing to contribute to an HSA after retirement?

Post by RubyTuesday » Fri Nov 15, 2019 3:25 pm

TresBelle65 wrote:
Fri Nov 15, 2019 3:09 pm
As far as front loading, there’s nothing stopping you from making the full contribution on Jan 1, but the allowed contribution is pro-rated for however many months you have eligible coverage. For example, if you know you’ll have eligible coverage from Jan to Jun, you could contribute 6/12 of the annual limit on Jan 1 the only caution is to double check later in the year and verify you contributed the right amount.

Not clear on this part.

Full contribution = the $4K plus per year limit?

Allowed contribution = ?
2020 HSA contribution limit (employer + employee)
Self-only: $3,550
Family: $7,100
HSA catch-up contributions (age 55 or older): $1000 (if family and both are 55+ Each have extra $1000)

eligible coverage - I am planning to keep my HPDP in retirement, so? not sure of the impact here.
If you are eligible entire year, you are eligible to make full contribution.

cas
Posts: 724
Joined: Wed Apr 26, 2017 8:41 am

Re: Continuing to contribute to an HSA after retirement?

Post by cas » Fri Nov 15, 2019 3:29 pm

TresBelle65 wrote:
Fri Nov 15, 2019 3:09 pm
As far as front loading, there’s nothing stopping you from making the full contribution on Jan 1, but the allowed contribution is pro-rated for however many months you have eligible coverage. For example, if you know you’ll have eligible coverage from Jan to Jun, you could contribute 6/12 of the annual limit on Jan 1 the only caution is to double check later in the year and verify you contributed the right amount.

Not clear on this part.

Full contribution = the $4K plus per year limit?

Allowed contribution = ?

eligible coverage - I am planning to keep my HPDP in retirement, so? not sure of the impact here.
IRS Publication 969 and the IRS Instructions for Form 8889 cover all the fiddly details. As IRS publications go, they aren't bad ... and since HSAs have lots of fiddly, non-intuitive details, they are well worth reading.

Specifically....

"eligible coverage"/"eligible individual"/"qualifying for an HSA" : https://www.irs.gov/publications/p969#e ... 1000204025

"allowed contribution": Line 3 Limitation Chart and Worksheet: https://www.irs.gov/instructions/i8889# ... 3806493808

(Note: the reason the allowed contribution on the worksheet differs from the 2020 allowed contribution given by RubyTuesday above is because it is still the 2018 version of the worksheet that is available online.)

as well as the accompanying Line 3 instructions above the worksheet: https://www.irs.gov/instructions/i8889# ... 3806514032

Sorry if it sound harsh to direct you to IRS publications, but these particular publications aren't that bad, and they'll do a better job of getting to all the fiddly details of your specific situation than readers out in internet-land can.

cas
Posts: 724
Joined: Wed Apr 26, 2017 8:41 am

Re: Continuing to contribute to an HSA after retirement?

Post by cas » Fri Nov 15, 2019 4:22 pm

TresBelle65 wrote:
Fri Nov 15, 2019 10:22 am

Currently, HSA Bank acts as an intermediary in this process (I am a federal employee),
so it would appear this relationship will end as well.

[ . . .]

Anyone have any experiences or tips to share with this process? Thank you.
HSA Bank will continue to be your HSA custodian after you retire. They don't force you to move your account elsewhere when your employer exits the picture.

However, if the employer (federal government) was picking up any of the fees that HSA Bank was charging, those fees will suddenly start being deducted from your account.

For this reason, many people at Bogleheads roll over their HSA accounts to a Fidelity individual HSA account once the tether to the employer is gone. No fees; long-established, professional brokerage with lots of choice in investments and services; customer service with good reputation; etc.

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